Independent Streak Keeps Firm Alive

By Joe D. Phelps
Monday, November 25, 2013

Imagine an industry where many decisions are minute to minute, and where 80 percent of most companies’ revenue is concentrated in fewer than 10 clients. Now imagine the pressure of having your important decisions approved in a timely fashion by someone who doesn’t know these clients, is in a different time zone and might be more focused on pleasing stockholders in the short term than your clients in the long term.

Those are just a few of the reasons why our company, Phelps, has remained independent for 33 years. Over the decades, as one of California’s largest independent integrated advertising and PR agencies, we’ve received inquiries from multinational marketing conglomerates. But it has never made sense to me to sell our company to one of them. Right now, the world’s two largest agency holding companies, Omnicom and Publicis Groupe (each of which own a few agencies in Los Angeles), are undergoing a merger that could have an effect on many in the business community.

Mergers and acquisitions are very common ways to grow in our industry. We’ve acquired five small agencies over the past 15 years. And we’ve been on the receiving end of many tempting offers to sell. So why not? When the subject comes up, some of my first thoughts are: “Life’s too short.” “Too much stress.” “It’s not all about the money.”

For a longer life: Heard that middle management carries the most stress in companies? Well, when a small to medium-size agency sells to a public company, the management of that agency becomes middle management. My guess is that negative stress in a fast-moving, quickly changing industry shortens lives. One of my objectives is to live a long, healthy life.

At 33 years, I’m the longest-running chief executive on the Business Journal’s list of biggest local advertising agencies, and the third longest for PR firms. I would have burned out years ago had I been focused on increasing profits for a public corporation at the risk of decreasing our client satisfaction and longevity.

It’s the culture, stupid: Folks today have increasingly higher expectations in terms of what they want from their jobs. In addition to fair compensation, they want a healthy working environment. Culture is king. Two-income households and the digital age have dramatically changed lifestyles. People want flexibility and personal satisfaction in the work they do. The larger the company, the more the employees have to endure explicit, restrictive policies. In smaller companies like ours, it’s mostly, “Do what’s right for your client and treat people like you believe they’d like to be treated.” We’ve found that if you hire smart, caring people and encourage them to stay in those boundaries, you don’t need a lot of other rules.